Wednesday, July 12, 2017

So apparently, the whole "Donald Jr. admits he was contacted by the Russians last year and offered info damaging to the Clinton campaign" story that was supposed to tank markets instead has sent US equities higher.

Proving, again, that you don't get trading cues from Reuters headlines.

There's pretty much no theoretical justification at all for Democrats to always show so poorly in working-class states like Tennessee, Mississippi, Alabama, Oklahoma and so on.

So it must be that Democrats have no clue how to speak to working-class people.

Which is actually not true. Really, the problem in the US is a strong rural/traditional-urban/liberal divide, and so what you have is the Republican party successfully pandering to the atavistic countryside, and the Democratic party not wanting to sully their name by associating with neo-Dixiecrats.

But the Democrats could at least be trying to guide rural/traditional voters away from Republican nonsense. It's possible: Jimmy Carter was a fundamentalist Christian who was also a very nice guy, for example, so why can't the Democrats find more like him?

And that probably does boil down to the essential problem: before the Democrats can make inroads in Jesusland they have to work to change the character of that society, the way the Republicans did through the 70s and 80s.

Anyway, with all that in mind, here are two grossly simplistic articles written by a Conneticut university-educated lifelong journalist, and a twenty something university-educated lifelong gay journalist:

This is already discussed in Graeber's Debt: the First 5,000 Years, but as Graeber's one-a them anarchists, most people in economics completely ignored his book and kept blathering on about money as some sort of thing that keeps its value which all other things must be measured against, and thus it was originally silver or gold, and thus blah blah fiat Weimar Zimbabwe.

No really, "fiat Weimar Zimbabwe" is one thing we learn in undergrad econ.

I think it's also interesting from a social constructionist point of view: money is not even remotely based on the exchange price of goods, we have centuries of proof that is has nothing to do with the exchange price of goods, and yet we've constructed a massive mythology based on utterly zero evidence and utterly zero scholarship that economics professors will spout off with zero thought and zero doubt.

Where the wharrgarbl is advanced that the fat finger yesterday in silver was an attack on the silver price by the JCB in an attempt to protect their bond yields, because of course it is.

Just typing this right now, the theory looks utterly fucking childish. Really? Japan is going to pursue a monetary policy strategy of selling silver calls into an illiquid market?

What does that accomplish? Silver is a fucking industrial metal. And its futures market is fuck, I dunno, must be something like 4 to 6 orders of magnitude smaller than the market for JGB or yen. A half a billion silver notional can be traded by some bro at a prop desk, and he'd definitely have the psychological makeup necessary to think it clever to pull that stunt at an empty book time of day; but a central bank?

You fucking serious?

He offers this as evidence:

Somehow, and I am not sure of the exact details, the Japanese government is using precious metals as part of their monetary policy. Now they might be doing it through the Postal Service Pension plan (GPIF) - after all, they have openly admitted to the BoJ buying JGBs from the plan, and the postal service pension investing in foreign stocks with the proceeds. There might be some sort of similar arrangement with precious metals. Who knows?

The fuck?

Gold doesn't matter to Japan. Japan's money supply is larger than the value of all the gold ever mined in the history of the world. Look it up.

Dude, you have no fucking clue about how monetary policy is conducted if you think Japan is going to go around cratering commodity prices to defend their bonds.

Been reading a first-year geography text, and in the section on demography there's an interesting point made:

All the countries in the world are aging right now. Median age is going to go up in every single country over the next 30-40 years.

I immediately realized this means interest rates will continue to go down for decades to come.

Here's why:

1. Younger people are borrowers, older people are lenders. More older people per young person means more lenders attempting to lend to fewer borrowers. Supply and demand means the neutral rate has to go down to make that market clear.

2. Older people are austerians (except when it comes to government largesse towards old people of course), and they vote. Thus, with a larger fraction of the population made of old people, governments will pursue more and more austerity, meaning government debt goes down relative to savings. Again, supply and demand means interest rates go down.

3. Old people spend less than young people on goods, and they exhibit no yoy growth in spending; and by (2) above they'll also be voting for more and more constraints on young people's spending. Thus, consumer demand will remain weak, so no investment demand by corporations, thus less borrowing again.

4. And so on.

You'll have a few intelligent governments spending a fortune on growth capital because lending is so cheap, and they'll be all that keeps the entire world from plummeting deep into negative rates.

Think about it, it makes sense: when did we last see high rates? When the baby boomers started their families.

I'd like to see if this AM's strong morning spike in GDX lasts through the day, cos gold's RSI is <30 and gold has been stuck on the -2SD Bollinger for long enough. If GDX claws back, then now's a good time to get in.

Anyway, one bit of reading to pass on:

Worthwhile Canadian Initiative - never mind the bollocks, here's the Phillips curve. He makes a very simple point that makes me think that anyone in central banking who even talks about the Phillips curve anymore must really have no fucking clue what they're doing:

As a lot of people in different countries have noticed, the observed Phillips Curve now looks very flat. Certainly a lot flatter than it did in the past.

And I've been saying of course it looks flat; that's because central banks are now targeting inflation and were doing all sorts of different daft things in the past. The whole point of targeting 2% inflation is to try to make the observed Phillips Curve as flat as possible at 2%.

Obviously. I mean, no matter what the unemployment rate, the Fed is targeting inflation of 2% or less (let's not beat around the bush, their target isn't symmetric). Thus, u is a straight line at i<.02.

Add rational expectations, and people now rationally expect the Fed to raise rates when i>.02, which is rationally expected (whether or not it's true) to strangle inflation growth at 2% by causing unemployment.

Makes you wonder why anyone would even talk about the Phillips curve anymore.

Oh wait, they're trying to justify rate rises so they can strangle the working class yet more while raising the rentiers' profit on owning capital.

Sunday, July 9, 2017

But it appears that after half a year of accomplishing absolutely nothing legislatively, the reality that the economy really hasn't changed at all -- in fact it may be waning just a bit -- is beginning to sink in.